THE CAPITA GROUP PLC - INTERIM MANAGEMENT STATEMENT
THE CAPITA GROUP PLC - INTERIM MANAGEMENT STATEMENT
The Capita Group Plc ("Capita"), the UK's leading business process outsourcing("BPO") and professional services company, is today issuing its interim management statement covering the 4 months to 30 April 2010 and progress to date. This statement coincides with its Annual General Meeting which is taking place today.
Update on performance, financial position and share buybacks
Capita has performed well in the first 4 months of 2010. All our key financial
metrics remain on track with strong cash generation, contained capital
expenditure and an efficient capital structure, with relatively low gearing.
Businesses across the Group are trading well, our bid pipeline is strong and
our prospect list is active, indicating that the market for significant
outsourcing opportunities is buoyant. Operational performance for our clients
Opportunistic share buybacks help us to maintain an efficient capital structure and minimise our long term cost of capital. To date in 2010, the Group has bought back 3.7 million shares (representing 0.6% of the issued share capital) at an average price of 733p per share. Following these buybacks the Company holds 3,753,284 shares in Treasury and has 616,554,597 shares in issue (excluding shares held in Treasury and the Capita Employee Benefit Trust). We will continue to buy back shares if opportunities arise and market conditions allow.
Generating growth organically and through acquisitions
We generate profitable growth both organically and through the acquisition of
small to medium sized businesses.
Contracts and renewals - Today we are announcing that, under their existing
partnership agreement, Sheffield City Council has requested Capita to deliver
and transform their Customer Services function. We are currently working
together to agree terms by the end of June 2010 and, subject to commercial
negotiations, the contract is expected to be worth 67m to the end of the
original contract term.
Also today, we are pleased to announce that Virgin Money and Capita are in the final stages of negotiations of a deal under which Capita Insurance
Distribution will provide end-to-end sales support, policy administration and
processing services for a new home and motor insurance proposition. This
includes a user friendly website, efficient back office processing and a
high-quality customer experience that reflects the Virgin brand. Worth around 60m over 5 years, the contract will enhance service delivery and complement Virgin Money's growing range of financial services products.
To date in 2010 we have therefore been selected to deliver 11 new contracts
with an aggregate value of 322m including contracts with Aviva International in Ireland, AXA (insurance administration services) and Nottinghamshire County Council. We are seeing significantly higher levels of bidding activity across both the private and public sectors than 12 months ago. Our most active markets remain local government and life and pensions, with increased activity in financial services.
We announce the size of our bid pipeline twice a year at our half and full year
results. This is a snapshot of bids, worth 10m or above, where we have been shortlisted to the last 4 or fewer. Our bid pipeline stood at 3.7bn on 25
February 2010. We face no material rebids (greater than 1% of previous year's revenue) until 2012.
General election - Although the future shape of the Government is still
unclear, there remains an imperative to address the fiscal deficit in the UK.
Therefore we continue to increase our focus on the central government market.
We believe that outsourcing will play a key role in helping the Government to
introduce efficiencies and deliver quality public services and we are well
placed to help in this.
Acquisitions - to date in 2010, we have acquired 6 businesses for a total
consideration of 46.7m:
* Inventures - a leading healthcare consultancy acquired for 6.8m, will
allow Capita Symonds, our property consultancy, to provide a unique full
service proposition across health and the wider public sector.
* NB Real Estate - commercial property management specialists, acquired for 10m. Combined with Capita Symonds, this acquisition offers the opportunity to provide a full service proposition across the real estate lifecycle and help public and private organisations to manage their property assets in innovative and efficient ways.
* Ramesys - a provider of integrated ICT solutions to the education and
commercial sector. This acquisition, for 15m, allows us to broaden and
deepen our own expertise in the education technology market and also
enables us to compete for larger and more complex education IT projects.
* Sureterm Direct - acquired for 8m, Sureterm Direct is a niche personal
lines broker primarily offering insurance for classic cars, motorhomes and
4x4s. This acquisition will allow Capita Insurance Distribution to align
its classic car insurance business with its other operations, increasing
the efficiency of its services to customers.
* Ross & Roberts - acquired for 5m, a debt management company.
* PAL Services - acquired for 1.9m, a trust administration business based in Luxembourg.
There is a good volume of potential acquisitions priced at attractive levels
and we expect to acquire further businesses this year that take us into
complementary areas and add expertise and value to the Group.
Operational delivery and performance
We continue to build value from our extensive infrastructure and use our scale to improve processes and drive through cost efficiencies. We have focused on smoothly transferring and integrating our contracts and acquisitions and delivering first class frontline and back office services to our clients.
Our contract with Becta, worth over 15.7m over 15 months, to manage grant marketing and administration for the Government's Home Access programme which provides computers and connectivity to low-income families that lack access to support learning, commenced in October 2009 and is progressing very well. The new service infrastructure was put in place within just 2 months and the service launched on 11 January 2010. As of 2 May 2010, we have taken over 800,000 telephone calls and 396,747application packs have been issued and 165,101 grants awarded.
Our contract with AXA is performing well. We have improved service levels as
planned, and successfully carried out the first phases of infrastructure
rationalisation. This work includes repatriating call centre operations from
India - a move which has resulted in positive feedback from customers - and
centralising UK operations, which will be completed this year ahead of
Arch cru funds - as reported in our full year results in February, dealings in
2 open ended investment companies (OEICs), for which Capita Financial Managers is the authorised corporate director (ACD) and Arch Financial Products LLP (Arch) was the delegated investment manager, were suspended on 13 March 2009.
We are working with other involved parties to resolve this matter in a way that takes appropriate account of the interests of investors in the OEICs but also recognises the interests of Capita's shareholders.
We have recently announced the appointment of two Independent Non-Executive Directors. Dr Nigel Wilson is appointed a Non-Executive Director, with effect from 12 May 2010. Nigel will be appointed as Senior Independent Director and to the Nomination, Remuneration and Audit Committees on appointment. Nigel is Group Chief Financial Officer of Legal & General Group Plc. Paul Bowtell is appointed a Non-Executive Director, with effect from 28 June 2010 and will become a member of the Nomination, Remuneration and Audit Committees on appointment and Chairman of the Audit Committee from 1 August 2010. Paul is Chief Financial Officer of Tui Travel PLC. Paul and Nigel's appointments add further financial and commercial expertise to the Board and we look forward to their contribution to the team as we continue to focus on the continued operational excellence and profitable growth of Capita.
Capita is well placed for a successful year. We expect turnover growth for the
year to be modest due to the quieter sales activity in the second half of 2009
and an unusually higher degree of revenue attrition in 2010. However, we see the benefits of the operational efficiencies we implemented in 2009, our
increasing scale and our Indian operations continuing to drive forward our
margins for the year. An encouraging level of sales activity, strong forward
visibility of revenues, no material rebids until 2012 and consistent
operational performance position us well for good progress in 2011 and